>RELIANCE INDUSTRIES LIMITED (JP MORGAN)

KG D3, D9 - Hardy Update - ALERT

• Technical Evaluation report from GCA: Hardy Oil (10% stake holder in KG D3 and D9) released a technical evaluation report by Gaffney, Cline & Associates (GCA) on resource estimates for KG D3 and D9 blocks. Risked resource data on both blocks indicate increase in resource estimates and higher Geological Chance of Success (GCoS) indicating higher probability of a prospect's drilling leading to a discovery.

• KG D3: GCA’s resource estimation based on identified prospects and leads for KG D3 block is 5.5TCF (unrisked) and 2.5 TCF (risked) with a 45% GCoS (chance of success), higher than 15-25% GCoS indicated earlier (GCA estimate May 2007). Additionally, GCA conducted a playbased exploration methodology estimate for resources to address both the current prospect inventory and the “yet to find” resource potential, the study indicates 9.5TCF of risked prospects.

• KG D9: Risked resource estimate for KG D9 is 10.8TCF, with unrisked resource estimate of 54TCF, up from 45TCF declared earlier (GCA estimate May07), leading to a 22% increase in unrisked prospects. Also, the GCoS (chance of success) has increased to 20% from 15% earlier.

• Drilling in 2HCY09 and CY10: For KG D3 (where two gas discoveries have been made), 2D data acquisition would be done till 1H09 with 4 exploration wells planned to be drilled in CY10, and for KG D9, exploratory drilling is planned in 1H09.

• Positive data point: The GCA ratification of high prospectivity in other blocks is positive for sustainability of RIL’s E&P business and valuation.

To see full report: RIL

>GODREJ INDUSTRIES (CENTRUM)

Godrej Properties - the next trigger

■ Higher raw material costs impact PAT: Net sales (consolidated) for the full year (FY09) grew 16.3% YoY to Rs34.2bn vs. our estimate of Rs32bn. However, PAT plunged 33.6% to Rs1.1bn (vs. estimate of Rs1.8bn) mainly due to increased raw material costs.

■ Revised rating and target price: The stock has achieved our target price of Rs120. Hence, we have changed our rating to Hold and set a revised target price of Rs129 on SOTP valuation. Currently the stock trades at 19x FY10 EPS of Rs19 and 15.6x FY10EV/EBIDTA.

■ Godrej Sara Lee stake merged with GCPL; SOTP value revised: GIL’s stake in Godrej Sara Lee is being merged with Godrej Consumer Products (GCPL) at a 1:1 swap ratio. This would consolidate the FMCG businesses under GCPL. Further GIL’s holding in GCPL would increase to 25%. We have revised our SOTP value to Rs163 and revise our target price, post a 20% conglomerate discount, to Rs129.

■ Godrej Properties results in-line: Godrej Properties reported revenues of Rs2.5bn (excluding other income), exactly in-line with our estimates. We believe revenues were booked mainly from the Planet Godrej project at Mahalaxmi in Mumbai and Bangalore projects. PAT stood at Rs750mn vs. our estimate of Rs583mn.

■ Chemicals division dampens results: The slump in the chemicals business, which contributes 22% to topline, impacted overall results. Fluctuations in commodity prices and currencies, curtailment of natural gas supplies to factories and sluggish business environment impacted the division on the cost and margin fronts.

To see full report: GODREJ INDUSTRIES

>JAIPRAKASH ASSOCIATES (MOTILAL OSWAL)

Yamuna Expressway construction site visit

Yamuna Expressway (formerly Taj Expressway) is one of the largest infrastructure projects under execution in India (cost Rs89b). The project would connect Noida to Agra, and also act as a check dam for Yamuna waters over a stretch of 165km. Post initial delays, execution is now progressing at an accelerated pace and is targeted for substantial completion by October 2010. The project is being executed by Jaypee Infratech, 97% subsidiary of Jaiprakash Associates (JPA).

We present below key takeaways from our visit to the construction site.

Earthwork completed on ~60%+ of project length, target to make road “motorable” by October 2010: For YE project construction, land for entire expressway over 165km is in possession. The construction work has been divided into 3 packages comprising (i) Earthwork, (ii) Interchanges, under passes, culverts, bridges, etc, and (iii) Concreting. Currently, earthwork and construction of interchanges / structures have commenced, and concrete work will commence post monsoons (from October 2009). To date, 60%+ of the earthwork has been completed and 80%+ is expected to be completed by monsoons.

Project achieved financial closure, incremental funding to be met through RE monetization: Total cost for YE project stands at Rs89.2b, including Rs11b towards cost of balance land acquisition for real estate (RE) development (5,175 acres). The project has achieved financial closure and is to be funded as: equity Rs12b, debt Rs30b (sanctioned by ICICI Bank), and Rs40b RE monetization at Noida, while balance is toward soft costs. Till date, total capex on YE project stands at Rs35b, and is financed through equity Rs10b, debt Rs20b and RE customer advances Rs5b. We understand that financing is comfortable, given: (i) RE pre-sales of 5.3msf at Noida (Rs27b) and target sales of 8- 10msf in FY10-11 (Rs30-40b), (ii) part of the project capex (~Rs20b+) towards interchanges, structures, etc could be spent post October 2010 with improvement in traffic, providing extra time period.

Valuation and view: We expect JPA to report PAT of Rs9.9b in FY10E (up 16% YoY) and
Rs9b in FY11E (down 9% YoY). Using SOTP, we arrive at price target of Rs224/share, of
which YE project is valued at Rs95/share (net off negative value for BOT projects). The stock
trades at a P/E of 21.1x FY10E and 22.7x FY11E. Maintain Buy. About Yamuna Expressway project: YE project will connect Noida to Agra through 165km 6-lane expressway built on BOT basis, with concession of 36 years, excluding 6 years for construction. The project also entails RE
development at five locations of 1,250 acres each (total 6,250 acres).

To see full report: JAIPRAKASH ASSOCIATES

>US ECONOMICS (HSBC)

Enough Adjustment?
Headwinds remain, but ready to recover

• Official recession ends soon
• Double-dip 2010 recession avoided
• Core inflation to fall on labor slack

This report updates our US economic forecasts.

The 2009 story has not changed much since our 27 March report, Break in the Weather. The official recession may soon be over. Consumers have cut back enough, as saving ratios have climbed to high enough levels, as long as asset prices can stabilize. On this front, stock prices have risen while house prices are still falling, but housing valuations appear cheap enough that a bottoming is in sight.

We stick with our view that GDP could rise as early as the second quarter, building up some strength in the second half of the year, but it will be a jobless recovery for a while, so unemployment will keep rising to about 9.75%. This should set the stage for a sizable decline in core inflation in 2010, down to under 1%. As a result, the Fed will not need to raise rates in 2010, providing a bullish backdrop for 10-year note yields despite the recent sell-off in response to deficit concerns. This will help keep mortgage rates low.

The loosening of financial conditions has been more than we anticipated over the past three months, and so we have taken out our “double-dip recession” scenario for the first half of 2010, where we now look for slightly positive growth rather
than slightly negative growth. This has had the effect of raising our 2010 year-average forecast from 0.5% to 1.9%.

However, 2010 growth will nevertheless be constrained and below trend, because significant financial headwinds remain and deleveraging will continue (but not enough to produce another recession, in our view).

Much of the upgrade to 2010 growth, however, is likely to be productivity led, so we have not changed our unemployment forecasts much. Indeed, payrolls could stay negative for much of this year and not stabilize until later in 2010, keeping wage growth and core inflation very low.

To see full report: US ECONOMICS